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October 31, 2007



There are lots of things that are wierd about the present US economy, not just the failure to respond to an oil shock. There is the effect of the adventure in IRAQ, the unprecendented rise in indebtedness (associated with huge sustained external deficits), the housing price boom, the run up to the baby boom retirement wave etc, etc. It is so strange I don't know what to expect.

I was pretty spooked by comparisons with the 1920s from many sources (from the whole political spectrum) a few years ago. That that hasn't happened as fast as expected is a relief, but the show isn't over yet.


I think overall inflation seems contained and people are not yet spooked by rocketing petrol prices. There is more concern about the credit crunch and financial sector problems. So far the oil is still flowing and people have other things to worry about such as their house price or mortgage. I think also people believe, rightly or wrongly, that some form of energy will be available to them. This is a stark difference to the calamities of the 70s and 80s. Now with biofuels and other energy streams to back up mainstream oil people have become somewhat complacent.


Maybe raf is right. It is the absence of rationing that is the key factor.


By the way, what do you make of the Bombshell today - "The peak oil crowd were right oil along - Ex Saudi Oil Manager".


I wonder why this is coming to light now. It means the Saudis are essentially reporting the end of OPEC as a meaningful entity.

My guess is it is a warning to Bush to stay out of Iran.


Every time the oil price rises, somebody blames it on speculation. (And as this has been going on for 5 years this speculation has remarkably deep pockets). OK so where are speculators keeping their held back oil?


«By the way, what do you make of the Bombshell today - "The peak oil crowd were right oil along - Ex Saudi Oil Manager".»

Well, what do you make of the recent UK government policy to ensure that train fares go up by 80% over the next few years?

A guess is that they expect that petrol prices go up by the same amount.

If all this happens, there will be a complete collapse in the price of country homes (e.g. Amersham), and a gigantic rise in the price of suburban ones (e.g. Uxbridge).

Since proximity to centres of employment is largely a function of age, as newer generations have had to commute farther, this means that retirees (or their heirs) will be able to sell their properties to younger working people for a very much larger price, and buy large properties in the countryside for a much lower price.

The whole ''long distance commute from the countryside home with a large garden'' idea that has driven village house prices temporarily to high levels in the past few decades was entirely dependent on low, low transport costs.

Living nearer to cities in much denser high rises will have to happen.


«"By the way, what do you make of the Bombshell today - "The peak oil crowd were right oil along - Ex Saudi Oil Manager"."»

«The whole ''long distance commute from the countryside home with a large garden'' idea»

Well, there is even a documentary about this:



I think a lot of this has to do with how we as americans are actually making changes in our lives and it shows that alternatives to oil have been a fantastic idea.

First off we have a large amount of electric car company startups around the world and many more companies that are invovled with them. As oil prices rise, so do these companies and these companies add to the GDP and labor demand.
Second, we have a wave of people moving into town and city centers, so the reason why high oil prices can cause a recession is when the population refuse to adjust and simply sink a larger and larger percent of their income into oil rather than goods. Take a look at the city center near you, chances are there is a revitalization plan, buildings are being converted into condos or condo towers are being built.
I recently made the move to buy a bike and stop driving, which means I cut all gasoline purchase from my budget and I have more money than ever to spend on other things.
The alternatives (ethanol, natural gas, electricity) help buffer the effect of rising prices, that's why I think $96 barrels of oil aren't currently causing $3.50 gasoline, although we will get there soon.

The faster we build ethanol infrastructure and we get our abandoned farm lands working for the economy and the faster we install wind and solar power, the better our economy will be and the less affect high oil prices will have on the economy.

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